Dell shares rise as demand for AI servers increases results and forecasts

(Reuters) – Shares in Dell Technologies rose 6 percent in premarket trading on Friday after strong demand for its artificial intelligence-powered servers prompted the company to raise its full-year revenue and guidance.

Dell, which supplies servers and related infrastructure to businesses, bolstered its AI push with a partnership with chip giant Nvidia earlier this year. With the help of Nvidia technology, Dell is attracting mid-range customers to upgrade their servers with AI capabilities.

“Dell’s beat was driven entirely by AI servers, storage and PC revenue, both of which were below consensus,” Bernstein analysts wrote in a note.

They said that 80% to 90% of the company’s server customers appear to be Tier 2 cloud service providers and that new deal opportunities appear to be competitive offerings to Super Micro Computer.

Revenue from Dell’s infrastructure solutions group, which includes the sale of servers, rose 38% year over year in the second quarter. Demand for AI-optimized servers, including the flagship PowerEdge XE9680 model, rose 23 percent sequentially to $3.2 billion, the company said Thursday.

Its AI pipeline now appears to be $11 billion to $13 billion, up from $8 billion to $10 billion in the first quarter, according to Bernstein.

Overall, Dell earned $1.89 per share on an adjusted basis and posted revenue of $25.03 billion, both beating LSEG estimates.

At least three brokerages raised their price targets after Dell’s results. The stock has an average price target of $155, with 19 of 22 analysts rating it a “buy” or higher, according to LSEG data.

At $117.29, Dell shares are down 35% from their May high.

(Reporting by Yuvraj Malik in Bengaluru; Editing by Shilpi Majumdar)